Does business intelligence still point to labour market slack?

Alastair Cunningham & Glynn Jones

One of the puzzles arising from the economic recovery has been the difficulty of squaring sharp falls in unemployment with – at least until recently – only slow growth in average earnings. The common interpretation is that there’s still more slack than “normal” in the labour market. However, in this post, we argue that there has been a more marked labour market tightening so that there is now slightly less slack than “normal”. That suggests that earnings growth has been suppressed by factors other than labour market slack – leaving a risk that wage inflation will pick up sharply if and when those factors wash out.

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Who benefits from the implicit subsidy to ‘too big to fail’ banks?

Rhiannon Sowerbutts and Peter Zimmerman

Governments have often supported troubled banks whose failure would damage the wider economy. The expectation of such bailouts amounts to free insurance for those who have lent money to these ‘too big to fail’ (TBTF) banks. This amounts to an ‘implicit subsidy’ from the government, with a value that may be as large as £100bn. But where does this money go? We think most of the benefit goes to those who own or work for banks. But verifying this empirically is a challenge requiring further research.
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Estimating and interpreting term premia in UK government bond yields: global influences on a small open economy

Iryna Kaminska, Andrew Meldrum and Chris Young

Since March 2009, UK long term rates have moved around a lot – as shown in Figure 1 – despite Bank Rate being held fixed. To understand these movements you need to understand term premia. In this blog, we suggest that much of the movement in term premia reflects global factors.

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Back to the future: why we’re optimists in the secular stagnation debate

Saara Tuuli & Sandra Batten

Seven years after the financial crisis, global growth remains anaemic and the policy setting is nowhere near normal. Some commentators have suggested that this reflects some kind of ‘secular stagnation’ which set in before the crisis. This would have profound consequences for future growth and development in both wealthy and poorer countries. We are more optimistic, and see a raft of emerging technologies that could transform growth in many sectors. In this post, we summarise the current debate and offer our views on it.

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